January 20, 2011

SEC Charges New York Firms with Fraud

The Securities and Exchange Commission continues its crackdown on companies for misleading investors, charging three affiliated New York-based investment firms and four former senior officers with fraud, misuse of client assets and other securities violations involving their $66 million advisory business.

In a complaint filed today in U.S. District Court for the Southern District of New York, the SEC alleged that West End Financial Advisors, West End Capital Management and Sentinel Investment Management Corp. convinced investors that their money was in stable, safe investments designed to provide steady streams of income.

Instead, as SEC New York Regional Office Director George Canellos put it, “They misappropriated and commingled their clients’ assets and sustained the illusion of a viable and successful business through a range of false representations.”

Between January 2008 and May 2009, the plaintiffs allegedly used substantial amounts of fraudulently-obtained bank loans to make distributions to certain West End fund investors, to make it appear that the investments were performing well.

During the same period, the operation’s investment adviser, William Landberg, also allegedly misappropriated at least $1.5 million for himself and his family. Landberg’s wife, Louise Crandall, and their family partnership are named as relief defendants in the SEC’s complaint.

The SEC also charged West End President Kevin Kramer, Chief Financial Officer Steven Gould and Controller Janis Barsuk for their roles in the alleged scheme.

The SEC’s case was investigated by Ken Joseph, Matthew Watkins and Cynthia Matthews of the New York regional office, with assistance from Alistaire Bambach. The SEC’s litigation effort will be led by Howard Fischer.

Last week, the SEC announced a $119 million settlement with the Charles Schwab Corp. for misleading investors in its Yield Plus mutual fund, which was marketed as a cash alternative. Last year, Goldman Sachs agreed to pay $550 million for misleading investors of a collateralized debt obligation by misstating and omitting key facts, and State Street Corp. shelled out $313 million to investors who were not informed about their exposure to subprime mortgages